Oil mixed as Chinese economy overshadows Trump plan to ease lockdown

[LONDON] Oil prices were mixed on Friday as China's worst quarterly economic contraction on record offset President Donald Trump's plans to revive the US economy.

Brent rose by 41 cents, or 1.5 per cent, to US$28.23 a barrel by 1347 GMT, while US crude for June was down 24 cents, or 0.9 per cent, at US$25.29.

The less active US crude contract for May tumbled by US$1.77, or 8.9 per cent, to US$18.10, attributable to the imminent expiry of the contract on April 21 and fast-filling crude storage.

"As the oversupply is more a topic for right now, the May contract trades at a deep discount to June," said UBS analyst Giovanni Staunovo.

The hobbling of China's economy was highlighted by data showing that GDP shrank 6.8 per cent year on year in the three months to March 31, the first such decline since quarterly records began in 1992.

China's daily crude oil throughput in March sank to a 15-month low as state refiners maintained deep output cuts, though there are some signs of recovery as the country begins to ease coronavirus containment measures.

Investors pinned their hopes on US plans to ease lockdown measures after Trump laid out new guidelines for states to emerge from a coronavirus shutdown in a three-stage approach, but the early boost to Brent prices was short-lived.

Excitement over Mr Trump's intention to end the country's lockdown seems to be dying down as traders realise that a return to full economic activity will not come overnight, said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

FXTM analyst Han Tan, meanwhile, pointed to the potential for oil prices to strengthen next month as moves to lift lockdowns gather momentum.

"If more of the global economy enacts plans to reopen and restores some sense of normality, that could help oil prices find a firmer floor in May, aided by the Opec+ supply cuts kicking in."

The Organization of the Petroleum Exporting Countries (Opec) and producers including Russia, a grouping known as Opec+, agreed on production cuts of nearly 10 million bpd last weekend after an earlier oil supply pact collapsed.

Earlier in the session oil prices found some support from a report of encouraging partial data from trials of US company Gilead Sciences' experimental drug remdesivir in severe COVID-19 patients, but the company cautioned that full data would need to be analysed to draw any conclusions.

Analysts said that investors remain cautious, with readings of economic indicators worsening while global supply chains remain shut and large-scale production stoppages put millions out of work.

Both oil benchmarks are heading for a second consecutive week of losses, with US oil prices at 19-year lows.

REUTERS